Storey v Lane

High Court of Australia|1980-07-01|Before: Brennan JJ

This matter was removed into this Court upon the application of the Attorney-General for the Commonwealth. It was an application under s. 60 (1) of the Bankruptcy Act 1966 Cth, as amended by the Bankruptcy Amendment Act 1980 Cth, and was before the Supreme Court of Queensland which was exercising federal jurisdiction pursuant to the Bankruptcy Act.

The facts out of which the matter arises may be shortly stated. The applicant Storey and his wife had carried on a business which failed and in which they had employed a clerk whose terms of employment were regulated by an award of the Industrial Commission prescribing rates of wages and terms of employment pursuant to the Industrial Conciliation and Arbitration Act 1961-1976 Q.. She had been employed from about June 1978 until September 1979 but in the latter stages of her employment she had not been paid the full amount of wages due to her and on the termination of her employment she was not paid the amount of holiday pay due to her. An industrial inspector under that Act caused complaints to be issued against Storey charging him with offences under the Act in relation to non-payment of wages and holiday pay and with failure to keep a proper wages book as required by the legislation. The matters were returnable on 1 July 1980 and were heard on that day, the applicant not appearing.

The charges were: (1) paying to an employee a lesser amount of wages than that prescribed by the Clerks and Switchboard Attendants' Award during the period 26 February 1979 to 19 October 1979 to a clerk employed by him contrary to s. 97 (1) of the Act. [For that offence he was fined $100 with costs $18 and ordered to pay the amount of wages unpaid, namely $2051.96, and in default of payment of the total amount within 28 days he was sentenced to 6 months imprisonment.]; (2) failure to pay holiday pay on the termination of the employment of the clerk referred to, in breach of the same award. [For that offence he was fined $100 and ordered to pay the amount of holiday pay due and unpaid, namely $716.46 and in default of payment of the total amount within 28 days he was sentenced to 6 months imprisonment cumulative upon any other period of imprisonment.]; (3) failure to keep a time and wages book during the period of 12 months immediately preceding 5 March 1980 contrary to the award referred to. [For that offence he was fined $30 plus costs $18 and in default of payment of the total amount within 28 days he was sentenced to 7 days imprisonment (concurrent).].

The first two offences were breaches of express provisions of the award and are punishable pursuant to s. 113 of the Industrial Conciliation and Arbitration Act upon prosecution pursuant to s. 97 (5) of that Act. The third offence was a breach of s. 126 of that Act and punishable under s. 112. By virtue of s. 116 (4) of that Act those offences were within the jurisdiction of an industrial magistrate and could be prosecuted in a summary manner under The Justices Act 1886-1980 Q..

In 1980 the applicant and his wife entered into a composition with their creditors under Pt X of the Bankruptcy Act which was approved by a meeting of creditors. However the applicant failed to make the payments due under the terms of the composition and on 10 November 1980 the applicant and his wife filed debtor's petitions under the Bankruptcy Act.

The applicant failed to pay the fines imposed upon him and the other amounts ordered by the Magistrates Court to be paid by him. On 31 December 1979 he was arrested and imprisoned under s. 165 of The Justices Act.

On 14 January 1981 an ex parte application was made to the Supreme Court of Queensland on behalf of the applicant for release and discharge from custody under s. 60 of the Bankruptcy Act. That application came before Connolly J. who ordered that notice be given to the Attorney-General for the Commonwealth and to the Attorney-General for the State of Queensland and thereafter the application to this Court for removal of the matter was made on 13 February 1981 and pursuant to the order of this Court the bankrupt was released on bail pending the determination of the validity of s. 60. Prior to the Bankruptcy Amendment Act 1980, s. 60 (1) of the Bankruptcy Act had been as follows:

The Court may, at any time after the presentation of a petition, upon such conditions as it thinks fit, discharge an order made against the property or person of the debtor under any law relating to the imprisonment of fraudulent debtors and stay any action, execution or other civil legal process against the property or person of the debtor and discharge him out of custody. It had been held by this Court in Commissioner for Motor Transport v. Train [16] that that sub-section did not authorize the discharge out of custody of persons held under criminal process and that prosecutions for offences against the Road Maintenance (Contribution) Act 1958-1969 N.S.W. did not constitute civil legal process within the meaning of the sub-section. No question of the validity of the sub-section arose in the course of those proceedings. The Bankruptcy Amendment Act 1980 repealed s. 60 (1) and replaced it by the following new sub-section: The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit -

(a) discharge an order made, whether before or after the commencement of this sub-section, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or

(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this sub-section, against the person or property of the debtor -

(i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or

(ii) in consequence of his refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt,

and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in sub-paragraph (i) or in consequence of his refusal or failure to comply with an order referred to in sub-paragraph (ii), discharge the debtor out of custody.

It will be observed that par. (b) enables a court exercising jurisdiction under the Bankruptcy Act to stay any legal process whether civil or criminal against the person or property of a debtor in respect of the non-payment of a provable debt or a pecuniary penalty and to order the release from custody or to discharge the debtor out of custody where he is being held in consequence of the non-payment of a provable debt.

An application was made by counsel for the Attorney-General of the Commonwealth to Connolly J. to adjourn the hearing of the application under the Bankruptcy Act to enable the Commonwealth to apply to this Court under s. 40 of the Judiciary Act 1903 Cth for an order that the matter be removed into this Court as being a matter arising under the Constitution or involving its interpretation. The constitutional question is the validity of s. 60 (1) of the Bankruptcy Act as inserted by the Bankruptcy Amendment Act 1980.

That application was made to this Court on behalf of the Attorney-General for the Commonwealth on 13 February 1981 and was granted. On the same day this Court ordered the release of the applicant on bail.

The only question which arises is the constitutional validity of the new form of s. 60 (1) of the Bankruptcy Act. There is no doubt that the amounts of wages underpaid and the amount of holiday pay due on termination of employment would constitute provable debts in the bankruptcy of the applicant and that, if the section is valid, the Supreme Court of Queensland in the exercise of jurisdiction under the Bankruptcy Act would have power to order the applicant's release under the amended section. The question is whether that section is a law with respect to bankruptcy. It was not suggested that it could be supported under any other head of federal legislative power.

We are not here concerned with any question concerning laws relating to imprisonment of fraudulent debtors referred to in s. 60 (1) (a), a topic discussed in Train's Case [17] . The relevant provision is par. (b) of sub-s. (1) and the facts of the present case fall within sub-pars. (i) and (ii), the unpaid wages and holiday pay being provable debts, and the applicant is held in custody for non-payment thereof. A court exercising bankruptcy jurisdiction would, on the words of the section, have power to discharge him out of custody.

The new sub-section draws no distinction between civil and criminal process but applies to each in relation to imprisonment for failure to pay provable debts. It thus operates in relation to a bankrupt who owes debts provable in his bankruptcy and who has been imprisoned for failure to pay such debts. It is obvious enough that his imprisonment deprives him of any opportunity of engaging in employment or any other permissible means of earning money to go towards the payment of his provable debts, whether those for the non-payment of which he was imprisoned, or others.

The gradual abolition (not yet complete in Australia) of imprisonment for debt has proceeded along with the development of the modern bankruptcy law. The lengthy history of these topics is detailed in Holdsworth's History of English Law (see, e.g., vol. VIII, pp. 229-245, vol. XI, pp. 446-447, 595-600, vol. XIII, pp. 376-378 and vol. XV, pp. 97-100). It is enough for present purposes to note the provisions for partial relief from imprisonment for debt in the Bankruptcy Act 1838 U.K. 1 & 2 Vict. c. 110 and the provisions of the Debtors Act 1869 U.K. 32 & 33 Vict. c. 62 which substantially abolished imprisonment for debt and which provided that it should come into operation at the same time as the revised Bankruptcy Act 1869 U.K. 32 & 33 Vict. c. 71. The history of the present s. 60 of the Australian Bankruptcy Act is discussed by Walsh J. in Train's Case [18] .

The nature of bankruptcy as it has developed in the United Kingdom and in Australia requires that it should operate uniformly on debts of equal degree owed by a bankrupt, uniformly both as to the bankrupt and as to his creditors, and requires that provisions for the re-establishment of honest debtors should likewise operate uniformly. It is of the essence of the bankruptcy power that it enables the control of the property of bankrupts and of their persons, at least so far as offences against the bankruptcy laws are concerned, by a central authority, both for the collection of their assets and the payment of their debts. Section 60 operates upon the person of the bankrupt in relation to debts which are provable in his bankruptcy and as such lies at or near the heart of the power.

In my opinion the material provisions of s. 60 (1) of the Bankruptcy Act are valid and prevail over the provisions of the Queensland legislation by reason of s. 109 of the Constitution.

Since writing the above I have had the advantage of reading the reasons for judgment prepared by the Chief Justice and the order which he proposes. As the whole matter before the Supreme Court of Queensland was removed into this Court it can as easily be finally disposed of by this Court as by the Supreme Court on a remission to it. I agree that in the circumstances the only proper order would be to discharge the applicant from custody. I am therefore in agreement with the declaration and order as proposed by the Chief Justice.

I agree entirely in the reasons for judgment of the Chief Justice, and concur in the declaration and order which he proposes.

I have had the advantage of reading the judgment of the Chief Justice. I concur in those reasons and in the order which he proposes.

High Court of Australia Gibbs C.J. Mason, Murphy, Aickin, Wilson and Brennan JJ. Storey v Lane [1981] HCA 47

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